Topic: Coverage & Claims

The Missouri Supreme Court has unanimously held a pollution exclusion to apply in a dispute between a lead smelting company and one of its insurers.

A policyholder was tricked by emails ostensibly from a vendor invoicing for work provided and sent $800,000 to the fraudster’s account.  In an action filed by the insured, a federal district court for the Eastern District of Michigan has agreed with the insurer there is no coverage for the loss.  The policy’s “computer crime” insuring agreement goes to “direct loss” of money “directly caused by” the “use of any computer.  According to the court, there were “intervening events between” receipt of the emails and transfer of the funds which “preclude a finding of ‘direct’ loss ‘directly caused’ by the use of any computer.”  The court, citing other jurisdictions’ cases about fraudulent emails, said “there was no infiltration or ‘hacking’” of the insured’s computer system and that the emails, although received via computer, “did not directly cause the transfer of funds.”  Instead, the policyholder itself took all the steps to effect the dispatch of the funds based on information in the emails. American Tooling v Travelers (E.D. Mich Aug. 1 2017). v. Travelers Cas. & Sur. Co., No. 16-12108 (E.D. Mich., Aug. 1,...

A policyholder was hit by a fraudster that developed emails mirroring the format of the company’s emails and showing knowledge of sensitive company details. Because of the ersatz emails, company employees were tricked into arranging a $4.8 million wire transfer to the perpetrator’s account. The federal district court for the Southern District of New York found coverage for the policyholder. The judge distinguished other recent decisions, finding “coverage [under the computer fraud coverage section] fraud where the perpetrator violates the integrity of a computer system through unauthorized access ….” According to the opinion, the funds transfer coverage section also applies because the thief impersonated an authorized representative and prompted company personnel to effect the wire transfer. Medidata Solutions Inc. v. Federal Ins. Co., No. 15-cv-907 (S.D.N.Y., July 21,...

The Massachusetts Supreme Judicial Court has ruled that under a policy with a duty to defend, “the insurer’s duty to defend does not require it to prosecute affirmative counterclaims on behalf of its insured.”